EXHIBIT 99.1
CAUTIONARY STATEMENT
Cenex Harvest States Cooperatives (the Company), or persons acting on
behalf of the Company, or outside reviewers retained by the Company making
statements on behalf of the Company, or underwriters, from time to time, may
make, in writing or orally, "forward-looking statements" as defined under the
Private Securities Litigation Reform Act of 1995 (the Act). This Cautionary
Statement is for the purpose of qualifying for the "safe harbor" provisions of
the Act and is intended to be a readily available written document that
contains factors which could cause results to differ materially from those
projected in such forward-looking statements. These factors are in addition to
any other cautionary statements, written or oral, which may be made or referred
to in connection with any such forward-looking statement.
The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be deemed to be a
statement that any one or more of the following factors may cause actual
results to differ materially from those which might be projected, forecasted,
estimated or budgeted by the Company in such forward-looking statement or
statements:
COMPANY SUBJECT TO SUPPLY AND DEMAND FORCES. The Company may be adversely
affected by supply and demand relationships, both domestic and international.
Supply is affected by weather conditions, disease, insect damage, acreage
planted, government regulation and policies and commodity price levels. The
business is also affected by transportation conditions, including rail, vessel,
barge and truck. Demand may be affected by foreign governments and their
programs, relationships of foreign countries with the United States, the
affluence of foreign countries, acts of war, currency exchange fluctuations and
substitutions of commodities. Demand may also be affected by changes in eating
habits, by population growth and increased or decreased per capita consumption
of some products.
Improved technological advances in agriculture could decrease the demand
for crop input products and services. Genetically engineered seeds that resist
disease and insects or meet certain nutritional requirements could affect the
demand for crop nutrient and crop protection products, as well as the demand
for fuel to operate application equipment and vehicles.
The Freedom to Farm Act of 1996 (the Farm Act), may negatively affect crop
production. The Farm Act more narrowly defines what will qualify as
environmentally sensitive acreage for purposes of the conservation reduction
program, with the result that extensive land has been put back into
agricultural production. The Farm Act also removed restrictions on the type of
crops planted (other than fruit and vegetables), allowing farmers to plant
crops having favorable prices and thereby increasing the production of those
crops. Increased production may lower prices of certain crops but increase the
volumes available for export. However, the Farm Act also reduced Export
Enhancement Program subsidies, which may adversely affect the ability of the
U.S. exports to compete with those of other countries. Reduced demand for U.S.
agricultural products may also adversely affect the demand for fertilizer,
chemicals, and petroleum products sold by the Company and used to produce
crops.
The 2002 Farm Bill currently pending in Congress may negatively affect
crop production. Production agriculture has been extremely dependent on
emergency and program payments in the last two to three years due to low prices
for their crops, currency fluctuations and global trade issues. Congress is in
the process of debating and enacting new legislation for the 2002 Farm Bill
that may affect government payments to farmers. Some factors that may affect
the government payments to farmers include the use of conservation practices,
risk management and counter-cyclical programs.
COMPANY SUBJECT TO PRICE RISKS. Upon purchase, the Company has risks of
carrying grain and petroleum, including price changes and performance risks
(including delivery, quality, quantity and shipment period), depending upon the
type of purchase contract entered into. The Company is exposed to risks of loss
in the market value of positions held, consisting of grain and petroleum
inventories and purchase contracts at a fixed or partially fixed price, in the
event market prices decrease. The Company is also exposed to risk of loss on
its fixed price or partially fixed price sales contracts in the event market
prices increase.
To reduce the price change risks associated with holding fixed price
positions, the Company generally takes opposite and offsetting positions by
entering into commodity futures contracts (either a
straight futures contract or an options futures contract) on regulated
commodity futures exchanges. While hedging activities reduce the risk of loss
from changing market values, such activities also limit the gain potential
which otherwise could result from changes in market prices. Hedging
arrangements do not protect against nonperformance of a contract. The Company's
policy is to generally maintain hedged positions in grain and petroleum, which
are hedgeable, but the Company can be long or short at any time. The Company's
profitability is primarily derived from margins on products merchandised and
processed, not from hedging transactions.
At any one time, the Company's inventory and purchase contracts for
delivery to the Company may be substantial.
COMPETITION. Some of our competitors are larger, better known and have
substantially greater marketing, financial, personnel and other resources,
including established reputations and working relationships than the Company.
TAXATION OF COOPERATIVES COULD CHANGE. Although under Subchapter T of the
Internal Revenue Code patronage refunds are excluded in determining taxable
income of a cooperative and patronage refunds are taxable to the recipient,
current income tax laws, regulations and interpretations pertaining to the
receipt of patronage refunds could be changed.
ENVIRONMENTAL LAWS MAY EXPOSE THE COMPANY TO FINANCIAL LIABILITY. The
Company is subject to federal, state and local provisions regulating the use,
storage, discharge and disposal of hazardous material into the environment.
Although our current operations have not been significantly affected by
compliance with environmental laws or regulations, government entities are
becoming increasingly sensitive to environmental issues, and we cannot predict
what impact future laws or regulations may have on potential environmental
liabilities to the Company.
CONCERNS WITH THE SAFETY AND QUALITY OF FOOD PRODUCTS. The Company could
be adversely affected if consumers lose confidence in the safety and quality of
certain food products. Adverse publicity about these types of concerns, such as
the recent publicity about genetically modified organisms and "mad cow disease"
in Europe may discourage consumers from buying certain products.
If the Company's food products become adulterated or misbranded, the
Company would need to recall those items and may experience product liability
claims if consumers are injured as a result. A widespread product recall or a
significant product liability judgement could cause products to be unavailable
for a period of time and a loss of consumer confidence in food products, and
could have a material adverse effect.
OIL AND NATURAL GAS PRICES ARE VOLATILE. Revenues and profitability in the
Company's energy segment and manufacturing operations depend on prevailing
prices for oil and natural gas. Historically, prices for oil and natural gas
have been volatile and are likely to continue to be volatile in the future.
The foregoing review of factors pursuant to the Act should not be
construed as exhaustive or as any admission regarding the adequacy of
disclosures made by the Company prior to the effective date of the Act.